Hurricane Harvey’s Effect on Insurers

Sapiens’ thoughts and prayers are with the people suffering from the devastating effects of Hurricane Harvey in Texas. One of the biggest motivators for the Sapiens team is knowing that our work helps people during some of the most difficult moments of their lives, including catastrophes.

We also of course directly support insurers, some of whose stock dropped following the storm, according to Reuters.

Hurricane Harvey’s whipsaw of wind and rain across Houston and the Texas Gulf Coast hurt the shares of U.S. property and casualty insurers on Monday as Wall Street analysts estimated insured losses as high as $20 billion.

There is at least one small silver lining, for both insurers and homeowners, as noted in an AP article.

Loretta Worters, a spokesperson for the Insurance Information Institute, said floods do have a least one positive effect: They convince people who had shrugged off the risk to their homes to buy policies.

But the memory quickly fades, she added, noting that despite the blows of Katrina and Sandy and other storms only 12 percent of homeowners nationwide had flood insurance last year.

Most residential flooding isn’t covered by private-sector insurers, but how can insurers help as many people as possible post-Harvey (and following future natural disasters) protect their homes and vital possessions before the next big news story comes along and distracts everyone?

Be Digitally Ready

Americans are likely super-motivated to buy homeowner insurance, as well as other types, after seeing so many tragic images and videos on the news. But human nature being what it is, many potential consumers will get discouraged and quit if they can’t buy policies quickly and conveniently. Most people (especially the younger generations) have become used to personalized and online buying experiences in their daily lives. Insurers who don’t offer customer portals, and/or don’t possess a full digital suite that is integrated with their policy administration system to provide a unique customer experience, risk missing this moment to help people insure their most vital possessions and financial future.

Offer Tailored Products Quickly

Texans with federally-backed mortgages living in the areas most likely to be affected by floods, called “special flood hazard zones,” were compelled to buy mandatory insurance policies with high premiums. Other people in areas that were perceived as less vulnerable (yet were still affected by Harvey) did not realize that their standard homeowners’ insurance didn’t cover flooding, while others had no insurance at all.

The days of one-size-fits-all policies are long gone for insurers. The ability to quickly offer tailored policies that factor in relevant regulations and specific geographical threats, obtain a full view of your customer and then offer bundles, and provide flexible pricing is crucial.

Possess Full Control of Your Reinsurance Activities

Reinsurance steps to the forefront following big natural disasters. Reinsurance programs can be extremely complex, with multiple covers and layers, and varying terms and conditions. Many organizations still lack the comprehensive reinsurance information management capabilities that would enable them to cope with the complexity via business functionality, provision of accurate and timely information, and support for compliance requirements and regulatory reporting. Claims leakage is another challenge, as too many insurance carriers are experiencing significant difficulty when trying to recover reinsurance claims.

The most successful insurers and reinsurers are handling all reinsurance activities on a single platform, with full financial control and auditing support.

Process Claims Accurately and Speedily

Jay Sarzen of Aite Group predicts in Digital Insurance that property and casualty carriers will deploy new technology, including drones and remote damage assessment via mobile upload, and leverage Big Data, to help resolve Hurricane Harvey settlement decisions. How quickly American P&C insurers are able to settle claims — as well as their ability to put a temporary moratorium on billing and collection for people devastated by the catastrophe — could impact their reputations for years going forward.

Hopefully, we’ll all be free from natural disasters like Hurricane Harvey for many years to come. But the insurance industry is all about being prepared. These four steps can help your organization stay ready for the future.

Eric Danis

Eric Danis is a senior content specialist at Sapiens who manages Sapiens Spotlight and writes original posts. When not creating and editing content, or thinking about the Boston Celtics, Eric enjoys spending time with his wife and three energetic children.